The Percentage Price Oscillator (PPO) is similar to the MACD in that it calculates the difference between two moving averages, but the key difference is that the PPO calculates the percentage difference, not the MACD’s absolute difference.
We can create this as a custom tool, using the following formula for a 12/26/9 PPO:
//Calculate the Moving averages
//Calculate the output plots
//Define the output line/colours
Once created, save as an indicator in a New Tool View so that when applied to a chart it appears in it’s own panel below the price chart:
Because these are percentage values it makes it easy to compare momentum between securities, rather than MACD. In this example the ASX Telecoms sector has the highest PPO Histogram value (ie momentum) at 0.87%. Compare that to Health Care which has a MACD Histogram value of 165 points, but that only represents 0.52% of the value of the index.
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